Several broad policy proposals from President-elect Trump could boost economic growth in 2017 and 2018. But lack of details creates uncertainty about the magnitude of the stimulus impact. We estimate that the proposed infrastructure investment plan, individual and corporate tax cuts, and increased defense spending could increase nominal GDP by 0.5% to 3.2% in 2017 and 2018. But a sharp appreciation of the U.S. dollar and protectionist policies could cut the stimulus effect in half. With the labor market close to full employment, fiscal stimulus would likely fuel higher inflation, prompting the Fed to accelerate its tightening path.
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